EU ETS & Aviation

In 2005, European Union (EU) policy makers turned their attention on regulating emissions from the aviation sector. Although aviation only accounted for 3% of global carbon emissions in 2009, the industry’s carbon footprint has increased by 98% between 1990 and 2006.1 Due to an emissions growth forecast of 667% from 2006 to 2050, the sector stands to become a more important source of GHG emissions in the future unless mitigation policies are being taken.

It is unlikely that the airline industry will be able to improve fuel efficiency at the same rate as air traffic expands. If total EU emissions were to be cut by 80% in 2050, airlines would ‘consume’ almost the entire allocation of CO2 allowances in the EU’s Emissions Trading Scheme (ETS).2 The European Commission (EC) therefore decided to include aviation into the EU ETS as of 2012, on the basis that this was “the most cost-efficient and environmentally effective option for controlling aviation industry emissions”.3 Emissions trading also received the support as best mitigation policy by the main industry body, the International Aviation Transport Association (IATA), in a letter to the EC in 2004.

Rules

All ‘attributed aviation emissions’, e.g. “emissions from all flights falling within the aviation activities listed in Annex 1 [of this Directive] which depart […] from the territory of a Member State and those which arrive […] from a third country”4 are included in the regional cap and trade scheme. The ETS rules for the aviation industry will follow similar rules as those for industrial installations. The airline operators will receive free allowances (EU Aviation Allowances – EUAAs) to cover most of their past emissions, but they will have to buy allowances through auctions or on the market if they emit more than the allocated amount. Operators can sell or buy allowances depending on whether they have a surplus or shortage in GHG allowances. It is also possible for the aviation industry to use allowances from industrial installations (EU Allowances – EUAs) or to offset their emissions using units generated under Kyoto Protocol mechanisms (Certified Emission Reductions – CERs or Emission Reduction Units – ERUs). Furthermore, it is possible to ‘bank’ allowances from one compliance period to the next to cover future emissions. The EU ETS next compliance period (phase 3) runs from 2013-2020.

Quick facts

The cap

Sizes the total quantity of allowances allocated to the aviation sector

The cap is set a

○ 97% (2012)
○ 95% (2013-2020) of the baseline

The baseline

Is the average of the annual aviation emission for the years 2004, 2005 and 2006

Baseline was published by the EC in March 2011 and is approx. 221 million tonnes of CO2

The benchmark

Is used to allocate the free of charge allowances to the operators

Is calculated by dividing the total cap by the sum of tonne-km data provided by the operators in 2010

Operators had to report their tonne-km date for 2010 to get free allocation

Amount of allowances for a certain operator is calculated by multiplying the benchmark with the 2010 tonne-km data of the operator

The operators will receive

○ 85% of the calculated allowances in 2012 and
○ 83% in 2013-2020

Special reserve

In each period 3% of the cap will be set aside in a special reserve for operators

○ Who start performing aviation activity after the monitoring year
○ Whose tonne-km data increase by an average of more than 18% annually between the monitoring year and the second calendar year of the period

Offset use

Airline operators can use

○ 15% of their emissions (2012)
○ at least 1.5% of their verified emissions (2013-2020)